Onder Nalbant, the Head of the Irun Engineering company, told LDaily about the advantages of wind energy over other types of renewable energy, as well as about the successes of this sector and the peculiarities of conducting energy business in Ukraine.
LDaily: Please tell us about the IRUN Engineering. What is your competitive advantage in the market?
O. Nalbant: Irun Engineering company is an HV Electrical engineering company specialized in wind farm construction, providing the necessary support to the foreign investors and EPC contractors at every stage: from wind yield assessment to operation and maintenance of wind farm. Our specialization in the energy sector is wind power.
In order to provide professional, economical, as well as point solutions, our company has all the necessary engineering capabilities, repeatedly tested by our customers. We help foreign investors and contractors start a business in Ukraine. Since we have been working here for a long period of time, we know the specifics and challenges of the Ukrainian market, and we understand exactly what foreign investors need and what kind of risks each of them may face. We are acting as a bridge that unites foreign investors and contractors with Ukrainian companies.
Our work is important due to the lack of qualified personnel in Ukraine, which is a big problem for foreign investors. They, in turn, must be locally registered and at the same time meet international standards. Usually, fulfilling such conditions is a problem for investors. In addition, they have a background in different cultures, and in order to run business in Ukraine, the investors must get acquainted with the local culture and the various sensitive aspects. That is why we decided to focus on foreign investors who already conduct business or are entering the Ukrainian market.
LDaily: What are the projects in the field of wind power developed by your company?
O. Nalbant: Personally, I was involved in the project in Odessa — designed, built, and put the facility into operation. However, that was before the creation of the IRUN Engineering and it only concerned me. As IRUN Engineering, we are not developers, we are helping the contractors and investors open their business in Ukraine and operate as the company.
We have participated in the creation of the two biggest wind farms and took important roles in project management and construction works.
LDaily: What are the advantages of wind energy over solar energy?
O. Nalbant: Wind energy is a bit like a premium league compared to solar. Although, at first sight, solar energy is much easier to produce and it`s easier to build and maintain solar power plants.
The extraction of wind energy requires in-depth knowledge from the project executors and highly specialized professionals, especially for the project to be successful. First, it is necessary to have a minimum one-year wind measurement campaign to fully implement the necessary measurements for the success of the future system, and to draw the right conclusions on the spot in order to understand the energy potential.
After a year of measurement and analysis, the future wind power manufacturer needs to confirm its intention to build the wind farm. There is also one interesting stage when wind turbine suppliers are not always available. They mainly close the year ahead for the production program.
In any case, the production of wind energy assessment requires sophisticated special software. This is much costlier financially compared to the solar energy production, but more profitable, taking into account the total amount of energy produced relative to the area used. For example, for the solar energy, you can occupy several hectares and produce only a few MW, and for the wind energy, you can produce much more MW per year from the same area. For that reason, wind energy is more profitable.
LDaily: In 2018, the capacity of the commissioned wind power plants in Ukraine amounted to 68 MW, in 2019 — 533 MW. What indicators are expected in 2020?
O. Nalbant: Bearing in mind the agreement (MoU) signed between the Ukrainian government and the “green energy” producers “Memorandum of Understanding on the settlement of problematic issues in the field of renewable energy”, as well as the new legislation in Ukraine in this area, all wind farm projects must be completed within two to three years, therefore, this and next year will be fruitful for Ukraine. If the interested companies do not complete the projects during the specified time, then they will not receive the benefits of the green tariff. In the South of Ukraine, I can even name already successfully launched projects: we have almost completed a 250 MW wind farm, a 500 MW plant is under construction, while its first 100 MW has already been completed, and the second 750 MW only began to build.
LDaily: What is the current situation of the investment in the wind energy? How has the coronavirus affected the investor`s sentiment?
O. Nalbant: In fact, the wind power business did not stop because of the Covid-19 pandemic. Definitely, I can confirm that there was a slowdown in the production, but the wind stations did not stop working. All involved companies and systems are continuing to use wind energy. The main reason for this I see the establishment of the mentioned term for the use of the green tariff. Of course, they have some difficulties and limitations in transportation, but I can say that it has not greatly affected the business of wind farms in Ukraine, for the construction of the wind farms continues.
LDaily: How is the structure of investments in wind energy working in Ukraine? Please tell us also about the ROI timeframes for the projects.
O. Nalbant: In the process of developing the project and obtaining the approval of the government body, companies primarily focus on finding investors. Sometimes financial support is necessary to attract the supplier. But in any case, the project in Ukraine is mainly funded by European and American financial authorities. In order to put such a project into operation, they must confirm its effectiveness, convey the headline indicators. In Ukraine, it is difficult to define the ROI timeframe as it depends on many factors. I can say that in about seven years the project will bring a gross profit.
LDaily: Is it easy to build a wind farm nowadays? What are the problems that could occur in this sector and what are the ways of solving these problems?
O. Nalbant: Building such a business is not difficult, after all, there are now many suppliers and companies. For many investors, this is no longer a nightmare. If talking about, for example, five years ago, yes, I can say that was risky. It was necessary to strain its own resources, attract foreign sources, and to not rely on Ukrainian resources. Today, the situation has changed significantly, in addition, the foreign investors are more familiar with running the business in Ukraine.
If talking about the disadvantages in this area, we are faced with the problem of the quality material. For example, in Ukraine, it is difficult to find a plant that would produce quality material. In this case, we have to buy a lot of parts from abroad. Secondly, the local producers are currently unable to supply the goods needed for the wind farms in large quantities, that is why we have to create our own production. When we need the work of the qualified staff, we usually invite employees from abroad, complementing the team with local staff. This is how we deal with the lack of resources in Ukraine.
Another problem – corruption: it is difficult to obtain approval and permission. Even when it comes to giving an example for the international open tendering, there is still not enough transparency in the tendering system.
LDaily: How do you see the future of wind energy and the development of this business?
O. Nalbant: Compared to other renewable sources — solar or hydropower — wind energy in Ukraine has become the largest and most profitable sector because it is quite good with the winds, and the tariff for green energy is the highest in Europe. That is why many investors, including local businessmen, will try to participate in the development of this sector. On the other hand, the role-model for wind energy production for Ukraine is Turkey, from which it lags behind by several years. In Turkey, you can see many plants that would otherwise be located in Germany or deliver the necessary components on a long journey from Germany to Turkey. Here it’s the same story: European manufacturers will build their factories in Ukraine, and this will open many opportunities for the country.
LDaily: What 2020 was like for your company? What are the results of the year?
O. Nalbant: 2020 was the most fruitful year in terms in of renewable energy construction. We have transferred a couple of professionals from other countries to handle the ever-increasing wind farm construction sites. The main reason of that blooming is that investors are speeding up their construction schedule to meet the deadlines for their signed Pre-PPAs and grid connection agreement. Another reason is the upcoming of a new auction auction system which substitutes the Feed in Tariff (green tariff) mechanism.